Search the Internet          Tips  Sites: Finance, Investment

Government evaluating Enron's offer to quit Dabhol

Government officials said that they were evaluating an offer by US energy firm Enron to sell its stake in troubled Dabhol power project to the central government.

A spokesman for the Dabhol Power Company, in which Enron holds a 65 per cent stake, said on Saturday the firm and its partners wanted to sell equity in the project to the central government or the lenders.

"We are assessing the situation. It is too premature to say anything right now," a senior central power ministry official, who did not want to be identified, said.

He said the central government had not received any formal offer from Enron to sell its equity in the controversial project.

Government sources said that ministry officials were talking to Indian financial institutions to assess Enron's statement.

A power ministry official said if the central government picked up Enron's equity in the project, it could save the government millions of dollars in penalties which it would have to pay if it lost an arbitration case over the project.

Apart from Enron, DPC's shareholders include U.S. group General Electric and Bechtel, which own 10 per cent each, and the Maharashtra State Electricity Board, which holds 15 per cent.

Enron has been locked in a bitter payment dispute with MSEB, which had signed a contract to buy all the power produced by Dabhol, whose first phase of 740 MW was completed last year, and the second phase of 1,444 MW is nearly complete.

A blessing

Maharashtra, where the project is located, welcomed Enron's offer to sell its equity in the controversial project, the PTI had reported.

"It will be God's biggest blessing for us," the agency quoted the state's Energy Minister Padamsinh Patil as saying in Bombay on Monday.

It also quoted the head of a negotiating committee, Madhav Godbole as saying that the panel's next meeting, scheduled after a month, would be cancelled in view of Enron's statement that it wants to exit Dabhol.

MSEB and Enron's dispute escalated in April, when the US firm notified the government it was applying to an arbitration court in London to consider its claim for 1.02 billion rupees owed by MSEB for power it purchased in December from DPC.

The company also sent a political force majeure notice to MSEB. Such a notice is a contractual clause dissatisfied parties give as a first step towards possibly dissolving a contract.

In May, the defaulting utility stopped buying power from Dabhol, saying it was expensive.

YOU MAY ALSO WANT TO READ:
The Enron Saga

Tell us what you think of this report